How To Sell A Small Business And For How Much?

September 12, 2020   |   Business

SVN | SRD's Larry Montanus discusses what it takes to sell your small business and the steps it takes to close.

Are You A Small Business Owner?

If the answer is yes, then you are part of an important group. You and your fellow owners account for roughly:

  • 60-65 % of the US GDP
  • 60% of US employment
  • 75-80% of all new job creations.

One of the toughest aspects of owning a business (besides surviving) is deciding what to do when that inevitable time comes of wanting or needing to get out. Are there family members or partners willing to buy you out and take over?  Are they capable? It’s important to have a plan because you may not be able to pick your time.

There are a couple of basic things to consider: The first is who will take over and the second is preparing the business for the successor.

Let’s take on the first issue. Do you have family involved and are they ready to handle the business? Do they want to take over? Only you can answer that but you need to know it now in case something unplanned forces the timing of a sale. The same questions apply if you have non-family partners. In either case you should have a written plan or ideally a contract that spells out the conditions for a transfer of control. Possibly more importantly, do you have a process for valuing your stake in the business? Lawyers can help with the contract and impartial business brokers/advisors can handle the valuation.

There are many factors that affect the valuation and not all of them are found in the financial statements. Some are:

  • The current value of the real estate and equipment.
  • The competitive advantages your product or services have.
  • The goodwill of your “brand name”.
  • The diversity and loyalty of your customer base.
  • The employee profile- are they ready and willing to carry on after a sale?

Having the business ready to sell doesn’t mean a sale is imminent. In fact, some of the steps involved in selling are beneficial to running the business now regardless of whether you plan to sell or step aside in the near future. Some components are:

  • Clean And Easily Understood Financials
  • Customer Lists
  • A Summary Of Your Business
  • An Evaluation Of The Marketplace Where You Compete
  • Key Product Advantages

These are all helpful to running or selling your business. They are the key components of a business plan and probably the business’s current success.

If there are no family or partners involved, then the sales process is even more complicated. Finding and marketing to valid prospective buyers and setting a realistic value are the toughest tasks. This is where professional advisors are critical.

All the above can be daunting, but need not be. The business brokerage services team at SVN | Saunders Ralston Dantzler is ready to help. Our team has experience in buying and selling businesses, valuations, and preparing business plans and strategies. Let us help you plan now for a future sale or purchase, and when it’s time—execute it.